Skip to content
Monday 31 August 2026London --:--Frankfurt --:--Zurich --:--
NewslettersSearchEN · DE · FR
MorningWire

European business, markets and politics

FTSE 100
10,824.26
+0.29%
DAX
26,258.11
-1.17%
CAC 40
8,334.50
-0.79%
STOXX 50
6,420.16
-1.01%
  • Europe
  • Markets
  • Business
  • Economy
  • Regulation
  • Politics
  • Opinion
More
GermanyFranceEU InstitutionsCompetitionPublic AffairsBankingTechnologyEnergy
  • Germany
  • France
  • Europe
  • Markets
  • Business
  • Economy
  • Regulation
  • Politics
  • Opinion
  • DE
Wednesday 28 August 2013 8:40 am

Carney’s productivity fixation

By: Peter Spence

Add as a preferred source on Google

While his predecessor Sir Mervyn King was no fan of uttering "productivity", Mark Carney  has delivered a speech peppered with the word.

This now appears to be a theme of Carney's public appearances, as he used the word repeatedly at this month's Inflation Report.

Ben Southwood, Adam Smith Institute:

It's interesting that Carney is putting his mind to productivity and aggregate supply—these are the things that determine the long-run living standards of society—but the reason Mervyn King didn't place too much emphasis on AS is that it isn't the Bank governors' job.

The Bank governors' job should be to stabilise the macroeconomy. Historically that has been through steady consumer price inflation, but the inflation target framework failed catastrophically and we are still paying for its flaws. The Carney Rule may be an improvement, but it is only marginal.

Carney should put a renewed focus on aggregate demand, ideally implementing a scheme to stabilise market expectations over nominal GDP, before considering AS issues, as vital as they are for the long run welfare of society.

He used the word no less than ten times during today's speech and seems to see it as a useful measure to determine the health of the economy.

Moreover, there is certainly scope for the economy to grow through an increase in output per hour worked rather than new job creation.  Productivity growth has been anaemic and – remarkably – the UK is no more productive than it was back in 2005 – before Jake Bugg got his first guitar.  The critical questions are how much and how quickly productivity improves.   

The MPC’s central view is that productivity growth is likely to pick up only slowly in the early phase of recovery, but that there is potential for growth to accelerate as the recovery takes hold.  The slow pickup in productivity means unemployment could initially fall quite rapidly, but fall short of 7%.

Over the next three years productivity is expected to grow at around 1.8% per year, below its pre-crisis trend of 2.2%.  While even that modest productivity recovery is not assured, it is hardly an aggressive forecast.  It implies that productivity reaches its 2008 level only in 2015.  And it means that productivity doesn’t catch up any of its current 15% shortfall relative to its pre-crisis trend.  

Were any productivity catch-up to happen, unemployment could take even longer than three years to reach the threshold. A rebound in productivity, if accompanied by higher output growth, would be no bad thing.  It would boost the incomes of those in employment and is an essential part of improving the UK’s competitiveness.

Carney isn't alone in thinking that productivity is important. In his classic 1997 book, economics professor George Selgin that what central banks really need is a productivity norm.

Professor Scott Sumner responds to some of Selgin's ideas here.

  • The real reason behind Britain’s productivity puzzle lies in the detail

Share this article

  • Facebook
  • X
  • LinkedIn
  • WhatsApp
  • Email

Similarly tagged content:

Sections

  • News

Categories

  • Morning Wire Content

Trending Articles

  • Pensioners to hand over bank statements in government benefits crackdown

  • Jaguar reveals the Type 01’s screen-free interior

  • Jamie Carragher: HMRC petitions for Sky Sports star to be declared bankrupt

  • City firms mandate phone and face-to-face comms bootcamps for Gen Z lawyers

  • Jamie Vardy bags Bundesliga rights as he steps up streaming war with Neville and Lineker

More from Morning Wire

  • Digital investment nearly doubles since 2019 yet AI’s growth contributions questioned

    Tech
    2024 was a transformational year for GlobalData.
  • Iran war could ‘halt growth’ across UK economy 

    Economics
    Andy Burnham, Mayor of Greater Manchester, in a dark suit and glasses, listening intently at a wooden table.
  • How patient can the Bank of England be?

    AD
    Historic Royal Exchange building in London with modern skyscrapers behind, clear blue sky.
  • Soaring energy bills set to fuel inflation spike

    Economics
    Smartphone displaying an energy bill notification with British coins and a banknote nearby.
  • Inflation leaps to 2.9 per cent in blow to Burnham 

    Economics
    Burnham cityscape showcasing modern architecture, bustling streets, and vibrant community life in a thriving urban setting
  • El Nino heatwaves to ‘fuel inflation next year’

    Economics
    Firefighter in helmet and uniform watching a blazing forest fire at night, red glow in the sky
  • Emergency government meeting held over high temperature amid ‘strain on public finances’

    Economics
    Aerial view of dry, brown farm fields affected by high temperatures, with a road and farm buildings.
  • Economists urge Bank of England to halt bond sales as borrowing costs climb

    Economics
    Bank of England headquarters with financial charts overlay, illustrating private credit stress test analysis
MorningWire

Independent European business, markets and political news for decision-makers.

Morning Briefing

Europe

  • Germany
  • France
  • EU Institutions
  • Europe

Business

  • Markets
  • Business
  • Economy
  • Regulation
  • Competition
  • Public Affairs

Editorial

  • Opinion
  • Editorial Policy
  • Corrections
  • Contact

Company

  • About Morning Wire
  • Privacy Policy
  • Terms of Use
  • Cookie Policy
© 2026 Morning Wire Ltd · Published by Morning Wire Media, Bahnhofstrasse 65, 8001 Zürich, Switzerland
Privacy · Terms · Cookies · Facebook